Correlation Between China Mengniu and Wienerberger

Can any of the company-specific risk be diversified away by investing in both China Mengniu and Wienerberger at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining China Mengniu and Wienerberger into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Mengniu Dairy and Wienerberger AG, you can compare the effects of market volatilities on China Mengniu and Wienerberger and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in China Mengniu with a short position of Wienerberger. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Mengniu and Wienerberger.

Diversification Opportunities for China Mengniu and Wienerberger

-0.38

Correlation Coefficient

China Mengniu  Wienerberger

Very good diversification

The 3 months correlation between China and Wienerberger is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding China Mengniu Dairy and Wienerberger AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wienerberger AG and China Mengniu is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on China Mengniu Dairy are associated (or correlated) with Wienerberger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wienerberger AG has no effect on the direction of China Mengniu i.e., China Mengniu and Wienerberger go up and down completely randomly.

Pair Corralation between China Mengniu and Wienerberger

Assuming the 90 days horizon China Mengniu Dairy is expected to under-perform the Wienerberger. In addition to that, China Mengniu is 2.12 times more volatile than Wienerberger AG. It trades about -0.03 of its total potential returns per unit of risk. Wienerberger AG is currently generating about 0.03 per unit of volatility. If you would invest  2,877  in Wienerberger AG on September 26, 2024 and sell it today you would earn a total of  371.00  from holding Wienerberger AG or generate 12.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	64.52%
Values	Daily Returns

China Mengniu Dairy  vs.  Wienerberger AG

China Mengniu Dairy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in China Mengniu Dairy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental indicators, China Mengniu showed solid returns over the last few months and may actually be approaching a breakup point.

Wienerberger AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wienerberger AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Wienerberger is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with China Mengniu and Wienerberger

The main advantage of trading using opposite China Mengniu and Wienerberger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Mengniu position performs unexpectedly, Wienerberger can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Wienerberger will offset losses from the drop in Wienerberger's long position.

The idea behind China Mengniu Dairy and Wienerberger AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Managers module to screen money managers from public funds and ETFs managed around the world.